The single issue

The coming dispute over the relationship between Euro "ins" and "outs" could begin the unravelling of the EU. Derek Coombs says that Britain has considerable clout on this issue but should not abuse it

The single most important issue facing the European Union, and one which will cast a shadow stretching into the next century, concerns the relationship between the “ins” and “outs” of the Euro single currency.

In an ideal world all the large European economies would join the single currency at the same time, thereby completing the logic of the single market. But this is unlikely to happen. The deal that is struck between the ins and the outs therefore becomes crucial-and has the potential to cause irretrievable damage to the European cause.

The in-out relationship can be a technical subject, but none the less public debate in Britain has so far been disappointingly thin. One reason for this silence is the broad opposition in the UK (on both left and right) to the project of the single currency itself. Opponents seem to believe, rather complacently, that as they have rejected the idea of a single currency, the continentals will see the light and reject it, too; there is thus no need to bother with the small print such as the relationship between ins and outs.

But as Michael Mertes, Chancellor Helmut Kohl’s adviser on European policy, explained in Prospect (May 1996), Germany’s Christian Democrat “true believers” will not be knocked off course by a few opinion polls showing that many Germans fear the Euro.

Germany will remain on course and will take with it an inner core of other countries-certainly France, Austria and the Netherlands. Probably the Italians, too, who seem to believe that somebody else running their monetary policy is better than running it themselves. The psychology of not wishing to be left out may also drag in several smaller states.

The outs, including possibly the UK, will then be in the invidious position of having to go on trying to meet the convergence criteria, including exchange rate stability, without having any say in the timing or management of the single currency.

A half-in, half-out status for the UK in the EU is untenable in the long run, as Christopher Johnson argues in his new book, In with the Euro, Out with the Pound: the Single Currency for Britain (Penguin). But in the short run we may need to manage a situation in which the UK is inside the single market but not the single currency.

The UK and France agree that there will have to be a new…

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